Understanding of the Design of Controls, Assessment Example

There are several steps that would be recommended for auditing Biltrite internal controls. The first step is where the organization is notified in advance so that they would be aware that auditing is to be done and at what day and time. This notification will also indicate the documents that are to be reviewed so that the auditor would understand the organization of the company. The second step is planning whereby the auditor will identify various areas of concern, and those that have risks. In this step, various meeting will be held together with the organization’s staff, and this will open a meeting between the organization’s senior management and the auditors. The auditor then describes the process to be undertaken, while the management describes their areas of concern.

Next step is the fieldwork, whereby after the series of meetings, the audit investigation is begun after learning some of the business procedures. These procedures entail interviewing of key staff, sampling, testing the current practices of the organization, testing all of their internal practices and rules, and reviewing of the organization’s laws. The next step after fieldwork is communication. Here, the auditor is in contact with the corporate auditor to whom he or she clarifies the process, gains access to the documents, and finally clarifies the procedure. After the completion of the audit, the other step is drafting the audit. This draft audit will have details of all that has been done, and whatever had been found. A list is then given to the concerned parties such as the management so as to review it and raise issues in case there are some in the areas of concern.

Corrections are then made, and then the statement is presented to the administration which is the seventh step whereby they are required to answer the report by answering whether they agree with the problems cited in the report or not. Finally, the final meeting is held as the last step in order to address the audit scope, or discuss the management response. The recommendations are that Biltrite should always be regularly audited in order to minimize fraudulent activities that maybe going on within the organization.

There are various weaknesses of internal control and they include inadequate staffing, poor segregation of duties, problems with accounts reconciliation, poor application of accounting principles, and financial closing process. The areas in accounting that also face weaknesses in internal control include financial reporting areas, revenue recognition, accounting for complex financial transactions, issues of taxation, contracts accounting, and cut offs.

During the accounting procedures, there is always need to assess the control risks that may affect the accounting procedures. For instance, during sales processing, it would always be courteous to assess control risk during the training of the sales representatives. This is since it will be likely to educate them on various areas where sales risks may occur. This is a convenient way of alerting them so as to avoid such risks. On the other hand, cash receipts would be assessed at the payment level. This is so as to be able to detect any risk or fraud that could be easily committed during the payment level.

This would help minimize the rate of fraud in the organization, and also theft. During purchases, it would be conducive to assess during the delivery after the purchase has been done. This is because it will help ascertaining that whatever has been delivered is what was purchased. During vendor payment, it is always crucial to assess at the payment level in order to avoid payment complications. Finally, payrolls should be assessed before payment has been done to the employees. This is so as to minimize chances of under payment or overpayment.

References

Hoggett, J. R. (2008). Accounting. Milton, Qld.: John Wiley & Sons.